U.S. housing starts rise to five-month high in July

Reuters Staff

WASHINGTON Aug 16 (Reuters) - U.S. housing starts
unexpectedly rose in July as building activity increased across
the board, supporting the view that investment in residential
construction will rebound after slumping in the second quarter.

Groundbreaking increased 2.1 percent to a seasonally
adjusted annual pace of 1.2 million units, the highest level
since February, the Commerce Department said on Tuesday. June's
starts were largely unchanged at a 1.19 million-unit rate.

Permits for future construction dipped 0.1 percent to a 1.15
million-unit rate last month. Economists polled by Reuters had
forecast housing starts slipping to a 1.18 million-unit pace
last month and building permits rising to a 1.16 million-unit
rate.

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Investment in residential construction contracted in the
second quarter for the first time in more than two years.

That, together with an outright decline in inventory
investment, a continued downturn in business spending and weak
government outlays, held gross domestic product to a 1.2 percent
annualized growth rate during the quarter.

Against the backdrop of a tightening labor market, which is
steadily driving up wages, economists expect a rebound in
residential construction spending in the third quarter. But with
housing starts still running ahead of permits, the anticipated
bounce-back could be modest.

A survey of homebuilders published on Monday showed
confidence rising in August, with builders optimistic about
sales now and over the next six months. However, their views
about prospective buyer traffic softened a bit.

Groundbreaking on single-family homes, the largest segment
of the market, rose 0.5 percent to a 770,000-unit pace in July,
also the highest level since February. Single-family starts rose
in the South and West, but tumbled 23.9 percent in the Northeast
and fell 2.6 percent in the Midwest.

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Housing starts for the volatile multi-family segment
increased 5.0 percent to a 441,000-unit pace. Groundbreaking on
multi-family housing projects with five units or more jumped to
the highest level since September 2015.

The multi-family segment of the market continues to be
supported by strong demand for rental accommodation as some
Americans shun homeownership in the aftermath of the housing
market collapse.

Permits for the construction of single-family homes fell 3.7
percent last month to a 711,000-unit rate, the lowest level
since September 2015, while multi-family building permits rose
6.3 percent to a 441,000-unit pace.
(Reporting by Lucia Mutikani; Editing by Paul Simao)